An automotive supplier was suffering from serious price reductions from its most important customers in Europe. The pressure on costs was very high. The interim manager was hired as a logistics expert and supply chain manager to significantly reduce transportation costs and thus make a positive contribution to the result.
The company has 180 suppliers in Europe, Asia and North America. The material has to be distributed to 8 branches in Europe. In Europe, this is mainly done by truck transportation. Higher diesel and toll costs as well as general price increases on the transport market were therefore among the particular challenges of this mandate. To make matters worse, the company had decided to buy more in Asia due to lower material costs. This transport from Asia to Europe had a further negative impact on transport costs.
Reducing the share of transport costs for 2019 to the 2015 level
The company's transport costs already accounted for one of the largest shares of operating costs in 2015, with a volume of EUR 5 million (2.2%). This proportion rose to 3 percent in 2019 due to price reductions by the customer. The interim manager was tasked with reducing transport costs to the 2015 operating cost share.
In close coordination with a supply chain analyst, the interim manager drew up an inventory of transport relationships from the supplier to the stores. With the information on average weight per transport relationship, carriers and prices, the interim manager defined which transport relationships were suitable for FTL (full truck load) transport.
New tender for FTL (full truck load) transport services
The company had previously worked with a main carrier who was responsible for all LTL (less than truck load) transport within Europe and part of the FTL transport. The interim manager negotiated with the main freight forwarder to freeze the price table for LTL transport.
The services for FTL (full truck load) transport were put out to tender again. As a result, 5 companies were selected that could be used as backups for the main forwarder to save costs. The new forwarders for all FTL transports were initially coordinated by the main forwarder (fourth party logistics provider). In a second phase (following the implementation of Control Tower software), these transport companies are to be managed by the client itself in future.
Processes for intra-European sea freight optimized for long distances
In a further part of the project, the interim manager revised the processes for intra-European sea freight (short sea shipping) for long distances (e.g. Turkey to Sweden). To this end, he created a semi-automatic, demand-oriented transportation planning system in Excel based on data from the ERP system. This planning makes it possible to shift transport volumes forwards or backwards. This ensures a maximum fill rate for FTL and FCL (full container load) transports.
Milkrun concept for more capacity utilization - control tower system prepared
The interim manager used the milkrun concept to make even better use of transport capacities. In other words, he identified opportunities to increase filling rates even further. However, the cost-saving concept of milk runs involves some complexity. Each iteration (each added milk bottle) increases the workload for the material planners. To manage this complexity, the interim manager defined requirements for a "control tower system" that would enable the company to plan and control the entire transportation process with minimal manual effort. He scanned the market and selected a partner. Before the end of the mandate, he designed a test phase with a reduced number of transports. The results of the test phase were to lead to the final decision on the purchase and implementation of the control tower system.
Transport costs successfully reduced to 2015 levels
The processes initiated by the interim manager were all successful. By June 2019, he was able to reduce transportation costs to the targeted 2.2% of turnover
